Will You Qualify for a COVID-19 Loan?

Due to the fast-changing nature of COVID-19 programs and SBA COVID-19 programs, posts may become quickly out of date. Please check our COVID-19 section for the most up-to-date information on rates, terms, and other info for PPP loans/EIDLs. 

Now that the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the historic $2 trillion stimulus bill aimed at supporting individuals and small businesses through the COVID-19 pandemic, has passed, we have a clear understanding of exactly what SBA resources will be available to small businesses and private nonprofits.

The next question is—will your business qualify? The Paycheck Protection Program (PPP) is designed to be accessible to a broader swath of borrowers than traditional SBA loans, while the SBA Debt Relief program maintains existing loan requirements for SBA 7(a) loans. 

The good news is that with 4 different financing options, your small business has several chances to qualify. Here’s what you need to know. 

The 4 Types of SBA Coronavirus Loans

Through the CARES Act and existing SBA programs, small businesses and eligible private nonprofits can apply for the following programs:

• The Paycheck Protection Program (PPP)
• Economic Injury and Disaster Loan (EIDL) and Loan Advance
• SBA Disaster Relief
• SBA Express Bridge Loans

Business Size Qualifications

The SBA defines small businesses as having 500 or fewer employees. The following businesses and organizations may qualify for an SBA coronavirus (COVID-19) loan under the CARES Act. 

Eligible for EIDL and PPP Loans

• Businesses with fewer than 500 employees
• Tribal businesses with fewer than 500 employees
• Cooperatives with fewer than 500 employees
• Employee Stock Ownership Programs (ESOPs) with fewer than 500 employees
• Individuals operating as a sole proprietor or an independent contractor during the covered period (January 31, 2020, to December 31, 2020)
• 501(c), 501(d), or 501(e) private nonprofits 

Eligible for PPP Loans Only

Hotels, restaurants, and franchises with fewer than 500 employees at each physical location may qualify for PPP loans. 

Requirements for Each SBA Coronavirus (COVID-19) Loan Type

In addition to being limited to small businesses and nonprofits, each SBA coronavirus (COVID-19) loan type has its own set of requirements. PPP loans have the least requirements, making small businesses most likely to qualify, while other loan types have more requirements and will limit which businesses can qualify. 

Paycheck Protection Program (PPP) Loan Requirements

In addition to the eligible business requirements listed above, PPP loans require that: 

• The business was operational on February 15, 2020
• The business is an independent contractor, sole proprietorship, or employs employees (for whom it paid salaries and payroll taxes) and/or independent contractors

Economic Injury and Disaster Loan (EIDL) Requirements

For financing through the EIDL program, a business must demonstrate that it has sustained “substantial economic injury” as a result of the coronavirus (COVID-19) pandemic. Substantial economic injury refers to businesses in strong standing prior to the pandemic who now find themselves unable to meet debt obligations or pay essential and ordinary operating expenses as a result of coronavirus (COVID-19). To qualify for this loan, you will likely need strong cash flow, solid credit score, or collateral. 

SBA Debt Relief

To qualify for SBA Debt Relief, which offers debt relief on new and existing SBA 7(a) loans, a borrower must meet the qualifications for an SBA 7(a) loan. SBA 7(a) loans may require a borrower to have a strong credit history, revenue, and time in business. Eligible businesses must also:

• Operate for profit (nonprofits are ineligible for SBA 7(a) loans)
• Have reasonable owner equity to invest
• Use alternative financial resources, including personal assets, before seeking an SBA loan
• Operate—or plan to operate—in the US or its territories

SBA Express Bridge Loan 

SBA Express Bridge Loans are only open to borrowers who have an existing relationship with an SBA Express Loan lender. Those who are applying for an EIDL may apply for an SBA Express Disaster Bridge Loan while awaiting a decision or disbursement of funds. 

What to Do If You Don’t Qualify 

If you don’t qualify for an SBA coronavirus (COVID-19) loan, you can explore other forms of financing. State and local agencies, along with a variety of corporations, have stepped up to support small businesses in addition to national resources available through the SBA. You can visit our Relief Resources for Small Businesses to learn more about the options that may be available to you. 

While every effort is made to ensure the accuracy of information when a story is published, the coronavirus pandemic and Paycheck Protection Program (PPP) have caused details to change at a rapid pace. Additional guidance from the government may change or clarify certain aspects of the forgiveness process and could result in changes to the information contained in these pages. For the most up-to-date information, please visit the COVID-19 section of our website. For more information, you can call us at (855) 853-6346. Lendio is not responsible for and provides no warranty as to the accuracy of this content. Lendio does not provide legal, accounting or tax advice. The information and services Lendio provides should not be deemed a substitute for the advice of such professionals who can better address your specific concern and situation.